Living standards and the labour market (letter)

by Greg Byrne

News Weekly, January 21, 2006

Sir,

If we take News Weekly's views on labour laws seriously, we must conclude that governments can legislate for higher living standards and that Third World poverty could be eradicated simply by enacting tougher labour laws.

According to the World Fact Book at www.cia.gov, Americans have much higher living standards than Australians, yet America has far less drastic labour market laws.

In fact, the general trend is for countries with tough labour laws to have lower living standards.

The critical thing is the size of the pie. A big pie means plenty for everyone. But a smaller pie means less, even if it is divided more fairly.

Before one talks about distribution, one must talk about production, because without production there is nothing to distribute.

If living standards are too low, the solution is more capital investment and more savings, and that means incentives for people to save.